Conscious Capitalism

February 2nd, 2011 by Paul Keegan

At the Container Store, employees have always come first. It’s a business model that makes a lot of sense.

Brought to you by Liberty Mutual's
The Responsibility Project

One of the first things a new employee at The Container Store does is watch a video presentation by the company’s co-founder and CEO, Kip Tindell. In his soft-spoken, laid-back style, the 57-year-old Tindell explains some of the core principles of the company, including the heretical notion that his first priority is not the customer, and not even the shareholders – it’s you, the employee.

The new hire may be skeptical, but soon finds that Tindell backs up his words in concrete ways: The average full-time salaried employee at The Container Store makes about  $46,000 per year, fully 50 to 100 percent higher than the retail store average, depending on the position. Tindell has not laid off a single worker since the economy collapsed in 2008, a remarkable feat given the drastic drop in consumer spending, which is only just starting to recover. And in an industry notorious for high turnover, The Container Store invests heavily in each worker, providing more than 260 hours of training in the first year compared to the retail average of just seven to 10 hours. It’s no wonder Tindell’s company has been named one of Fortune magazine’s “100 Best Companies To Work For” for 12 years in a row. “I think we have a moral obligation to make employees look forward to getting out of bed and going to work in the morning,” he says.

Tindell is at the forefront of a business movement called conscious capitalism, which contends such ethical and compassionate behavior is not mere altruism – it’s the key to profitability and success. In 2008, Tindell’s former college roommate, Whole Foods founder John Mackey, began organizing an annual event for business leaders called the Catalyzing Conscious Capitalism Summit and teamed up with Tindell to spread the message. The Container Store makes a convincing poster child for the movement: Since opening his first store in Dallas in 1978 with partner Garrett Boone (now chairman emeritus), the company has grown into a nationwide chain of 49 stories with revenues expected to reach $650 million in 2011. “You can do good for the world while you are doing very, very well in business,” Tindell says.

While the concept of “corporate social responsibility” has been around since the early 70s, the conscious capitalism movement wants companies to think beyond the outside causes and charities they support to consider how they operate internally and treat all their stakeholders, from customers and employees to suppliers and shareholders. Nobel laureate Muhammad Yunus first coined the term "socially conscious capitalist enterprise" in the mid-90s to describe his Grameen Bank, which makes small loans to the poor of Bangladesh. Mackey later adapted the phrase to create Conscious Capitalism, Inc., a non-profit that is trying to spread the gospel to business schools, corporate boardrooms and small businesses alike.

“We’re unapologetic free-marketers but we don’t believe business is a zero-sum game of `I win, you lose,’ says Rand Stagen, chairman of Conscious Capitalism, Inc. “In a company’s relationship with vendors, employees, customers, shareholders and long-term partners, you can create win-win situations and a bigger pie for everyone. That’s a very different paradigm from the traditional view that businesses exist for one reason alone – to generate returns for shareholders.”

That may sound a bit vague until a company like The Container Store puts those ideas into action. When retail sales plunged during the recession, many stores simply laid off workers to cut costs. Strictly by the numbers, that’s a rational strategy, but Tindell’s view of business as a complex web of human relationships guided him to a different solution. To preserve jobs, he implemented a freeze on salaries and matching 401(k) contributions. He negotiated better deals with suppliers, with whom he already had excellent relationships, and inspired his loyal sales staff to re-double their efforts to hit their targets, The strategy worked: sales at The Container Store were down only half as much as other retailers in the housewares sector, and the company maintained its customary healthy 10 percent operating profit margin, even during the depths of the recession. (The salary freeze has since been lifted and the 401(k) match will be reinstated at the end of February.)

Born in Baton Rouge, La., Tindell began forming his business philosophy as a student at Jesuit College Preparatory School in Dallas and adopted industrialist/philanthropist Andrew Carnegie’s mantra: “Fill the other guy’s basket to the brim, then making money becomes an easy proposition.” For Tindell, this means making sure anyone you do business with, from suppliers to shareholders, does well. But he makes it clear that his employees rank number one. This is hardly a widely shared view, given how often companies resort to layoffs and using temp workers as the economy struggles. But, as Tindell puts it, “If you really and truly put the employee first, they’ll take care of the customer better than anybody else and ultimately the shareholders and other stakeholders benefit as well.”

The success of that philosophy is palpable. A customer stepping into The Container Store will never hear an employee say, “That’s not my department;” each worker is trained to know where all 10,000 items for sale are located. Employees are encouraged to be creative and devise their own solutions to problems that arise, rather than memorizing a manual. (That’s one reason the company attracts a fair number of workers with advanced degrees.) All employees are given detailed information about the inner workings of all aspects of the company, making them feel valued and respected. Salespeople who are happy and helpful inevitably inspire customers to spend more.

The Internet has made the inner workings of companies more transparent, creating an even greater motivation for chief executives to promote ethical and responsible behavior.  But The Container Store has operated in pretty much the same fashion for more than 30 years, based on certain guiding principles, like the one Tindell developed that uses a simple boating metaphor: We all leave a powerful wake behind us.

“My favorite movie is It’s a Wonderful Life, which you could say is corny, but in a wonderful way,” Tindell says. “That whole movie shows the power of one man’s wake. That’s a big philosophy of mine: Our wake is much bigger than we think it is." 

Paul Keegan is a contributing writer for Fortune and Money magazines and has written for The New York Times Magazine, Esquire, GQ, and other publications.